Kovacevich Calls Out Regulators for ‘Asinine’ Stress Tests
From Bloomberg today:
Kovacevich said the government is still making mistakes as it tries to save the industry. The “stress test,” designed to determine which of the 19 largest U.S. banks need more capital, provides opportunities for short-sellers to drive down bank stocks and can hurt confidence in the system even more, he said.
The Obama administration announced the test last month and said it will help determine which banks are healthy enough to withstand surging unemployment and tumbling home prices. Results are due by late April, according to the Treasury.
“We do stress tests all the time on all of our portfolios,” Kovacevich said. “We share those stress tests with our regulators. It is absolutely asinine that somebody would announce we’re going to do stress tests for banks and we’ll give you the answer in 12 weeks.”
Isaac Baker, a Treasury spokesman, said the stress test will protect the banking system.
“This program will help ensure banks have the capital they need to continue lending through an economic downturn that is more severe than expected and help restore confidence that our financial system is sound,” Baker said in an e-mail.
Finally, someone in banking speaks up about these ridiculous stress tests.
